The Truth About The First-Time Homebuyer Credit

2944582909_ea72da6441A few weeks ago, I had the opportunity to speak with friend of the blog Sarah Cox of The Roanoke Times about the First-Time Homebuyer Tax Credit.  We wanted to clear up some of the confusion about the credit, and Sarah posted a piece in The Roanoke Times today about it (seriously, RT, can we get this section of the paper online?).  Here’s a reprint (links are mine), as well as a follow-up at the end now that even more details have changed.

“While there is no doubt the first-time buyer credit is being met with enthusiasm, there have been a few myths and misunderstandings about how it works, according to REALTOR Jeremy Hart of NRVLiving & Coldwell Banker Townside in Blacksburg.

Formally known as the American Recovery & Reinvestment Act of 2009, information about it is available through the Virginia Association of REALTORS (VAR) website (

This will download a PDF one-page brochure, “What You Should Know About the First-Time Homebuyer Tax Credit.”

On his blog, Hart simplifies the information by stating that first-time homebuyers who purchase their homes within the Jan. 1 to Nov. 30 time slot are eligible to receive a tax credit of up to $8,000.

‘That tax credit can be applied to their 2009 taxes.  In the last few days, there’s been talk that the credit can be applied as a down payment at closing, and where there are all kinds of sites that right now are saying ‘Yes, you can,’ hold tight – the lenders I’ve talked to locally are saying ‘Not so fast’ … they are waiting on more details,’ he said.

There is a difference between the 2008 buying incentive and this one.

‘Last year’s was a $7,000 credit that had to be paid back over 15 years or at the sale of the home,’ explained Hart.  ‘This one doesn’t have to be paid back unless a homeowner moves sooner than three years.’

If the homebuyer moves before three years occupancy, he or she is obligated to pay back the whole amount.

Another important point is that the tax credit amount is up to $8,000.  It is equal to 10 percent of the cost of the home, and the maximum credit is $8,000.  A buyer claims the tax credit on his or her federal income tax; if the credit is greter than the total tax liability, the homeowner will receive a refund check for the balance.

And only first-time homebuyers can take advantage of this tax credit.  That is defined, said Hart, as a person who has not owned a home in the last three years.  But there is an income caveat involved.  People with adjusted gross incomes of up to $78,000, or $150,000 if filing jointly, are qualified.  Those who earn more qualify for less credit.  Those with incomes of $95,000 (jointly, this is $170,000) or above don’t qualify at all.

Hart said entering the third quarter of the year, he has seen positive effects of the tax credit.

‘It has helped stimulate certain segments,’ he said.

In mid-May, Hart said it has stimulated buyer activity.

‘Last week, three out of four first-time homebuyers were taking advantage of this; the homes ranged from $150,000 to $435,000.  They all have said that it helped them be ready to buy,’ said Hart.”

An update – the credit can now be used as a downpayment, but check with your lender before applying.

The picture has nothing to do with the post – I just liked it.

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